Competition among lenders to attract home buyers with smaller deposits heated up further today, with the launch of a new market-leading deal.

The Post Office launched a fee-free deal for borrowers with a 10% deposit with a fixed rate of 4.55% for five years, placing it at the top of "best buy" tables.

It also introduced another market-leading mortgage product for people with larger deposits among its re-invigorated range.

The five-year fixed deal at 2.74% is for people with a 40% deposit and comes with a £995 fee.

The deals are the latest in a mortgage price war which has broken out in recent months, following the introduction of a Government scheme in August to boost lending by giving lenders access to cheap finance.

Much of the strongest competition has been aimed at people with larger deposits, although more recently there have been signs of greater efforts to attract those with smaller deposits.

Last November, the Co-op launched a fee-free two-year mortgage with a rate of 3.99% for buyers with a 10% deposit.

That deal was withdrawn from the market last month, but a spokeswoman for the Co-op said the lender was still offering some fee-free deals and it planned to continue to use the Government's Funding for Lending scheme to help first-time buyers in particular this year.

Barclays also recently launched its "springboard" mortgage to help buyers with a 5% deposit get on the property ladder, provided that their parents stump up 10% of the purchase price of the property, which is kept in a separate savings account linked to the mortgage.

Rachel Springall, spokeswoman for Moneyfacts, said: "It's great to see Post Office launching some top deals for borrowers, particularly those aimed at the first-time buyer.